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Sanofi Agrees to Pay $109 Million to Resolve Allegations that It Gave Free Drug as Kickbacks to Physicians
December 19, 2012

Boston – Sanofi-Aventis U.S., Inc., and Sanofi-Aventis U.S., LLC, subsidiaries of international drug manufacturer Sanofi (collectively, “Sanofi”), have agreed to pay $109 million to resolve allegations that Sanofi violated the False Claims Act and the Anti-Kickback Statute by giving physicians free units of Hyalgan, a knee injection, to induce physicians to purchase and prescribe the product. The settlement also resolves allegations that Sanofi submitted false average sales price (ASP) reports for Hyalgan that failed to account for free units distributed contingent on Hyalgan purchases. The government alleges that the false ASP reports, which were used to set reimbursement rates, caused government programs to pay inflated amounts for Hyalgan and a competing product.

The United States contends that, facing pressure from a lower-priced competitor, Sanofi provided its sales representatives with thousands of free “sample” Hyalgan syringes and trained its sales representatives to market the “value add” of these syringes to physicians. In practice, the United States alleges, Sanofi sales representatives often entered into illegal sampling arrangements with physicians, using the free drug as kickbacks and promising to provide negotiated numbers of the syringes in order to lower Hyalgan’s effective price. The government contends that there were numerous such arrangements, including:

- A Southern California-based Sanofi sales representative who allegedly provided 25 Hyalgan samples to a physician practice for every 100 Hyalgan syringes purchased, and who supplemented these kickbacks by regularly treating the entire practice to lavish dinners at Morton’s restaurant at Sanofi’s expense and with Sanofi’s approval.

- A New York-based Sanofi sales representative who allegedly provided 12 Hyalgan samples to a physician practice for every 50 Hyalgan syringes purchased, and whose manager supplemented these kickbacks by treating the practice, along with friends and family members, to a lavish dinner in Manhattan at Sanofi’s expense and with Sanofi’s approval.

- A Central Texas-based Sanofi sales representative who allegedly promised a physician practice 125 Hyalgan samples in exchange for a purchase of 500 Hyalgan syringes and was lauded by Sanofi’s Texas sales team for “[u]tiliz[ing] samples to provide value for the office.”
The United States contends that price was important to physicians because Medicare and other insurers provided reimbursement for Hyalgan and its direct competitor at the same, fixed rate. Thus, the cheaper product afforded a greater reimbursement “spread,” or profit, to physicians’ practices. According to the government’s allegations, Sanofi chose not to compete by lowering the actual invoiced price of Hyalgan, for fear of setting off a price war with its competitor that would lead to a “downward spiral” in reported prices and physician reimbursements. Instead, the government alleges, Sanofi surreptitiously lowered the effective price of Hyalgan by promising “free” Hyalgan syringes to doctors who agreed to purchase the product. The government alleges that Medicare and other federal health care programs paid millions of dollars in kickback-tainted claims for Hyalgan.

“The government’s allegations describe a situation where a drug manufacturer used valuable free ‘samples’ of a drug to subvert Medicare’s drug reimbursement system for physicians and caused federal programs to overpay for the company’s product,” said Carmen M. Ortiz, United States Attorney for the District of Massachusetts. “This is not the first time that this Office has brought action against a manufacturer who engaged in such an illegal scheme, and the government will remain vigilant in policing such conduct.”

“Kickback schemes subvert the health care marketplace and undermine the integrity of public health care programs,” said Principal Deputy Assistant Attorney General for the Civil Division Stuart Delery. “We will continue to hold accountable those who we allege are providing illegal incentives to influence the decision making of health care providers in federal health care programs.”
“Patients expect their health providers to be concerned solely with their best medical interests” said Daniel R. Levinson, Inspector General for the U.S. Department of Health. “Kickbacks undermine that all-important patient trust, and taxpayers’ expectation that government health dollars be put only to the wisest of uses.”

The government notes that Sanofi cooperated in aspects of the investigation, and that Sanofi ceased distributing Hyalgan samples shortly before the government commenced its investigation. The government took Sanofi’s cooperation and its current practices into account in agreeing to this civil resolution.

Today’s settlement with the France-based pharmaceutical manufacturer resolves a lawsuit filed by former Sanofi sales representative Mark Giddarie under the qui tam, or whistleblower provisions, of the False Claims Act. Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery. Giddarie will receive $18.5 million as his share of the government’s recovery.

This matter was investigated by the Boston and Orange County, California, offices of the Federal Bureau of Investigation and the Boston offices of the Inspectors General for the Department of Health and Human Services, the Office of Personnel Management, and the United States Postal Service, and was handled by District of Massachusetts Assistant United States Attorney Gregg Shapiro and Department of Justice Trial Attorney Douglas Rosenthal of the Fraud Section of the Civil Division.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $13.9 billion.

This case is docketed as United States ex rel. Giddarie v. sanofi-aventis U.S., Inc., No. 10-CV-10070 (D. Mass.).

 

 

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